The uncle claims cash flow will be 75% of sales. When the time comes to remodel, the price tag is $65,555. The new buyer is stuck, as he the remodel is required in his agreement.
He overpays for the store by approximately $65,555.
SUBWAY franchise horror stories are not that hard to find.
A buyer decides to purchase an existing Subway franchise without getting professional advice.
The new buyer learns that cash flow is actually 67% of sales, and that his rent is too high.
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A seller assures the buyer not to worry about the franchisor’s remodel requirement.
The broker refuses to list it, as it’s clearly overpriced.
When his cash flow cannot support him or his debt service, he asks a business broker to sell it for what he paid for it (ie, find another sucker to stick it with).
A buyer purchases a Subway restaurant from his uncle.
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If he wants to sell, his asking price will be determined by the lower sales volume.
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A seller assures the buyer not to worry about a new Subway store opening in the same market.
He tries to sell, but cannot get near what he paid for it.
He had a friend who just remodeled his store for $65,555, he says.